ECONOMIC REVIEW SPRING 2007 JUNE 2007 By Jennifer Brown Peter Sturman Kadhem Jallab Reference: EC 07/02 Price: £15.00 TYNE & WEAR RESEARCH AND INFORMATION 1st Floor Provincial House Northumberland Street Newcastle upon Tyne NE1 7DQ Tel: (0191) 277 1912, Fax: (0191) 277 1911 E-MAIL: [email protected] WEBSITE: www.twri.org.uk Supported jointly by Cities of Newcastle and Sunderland and the Metropolitan Boroughs of Gateshead, North Tyneside and South Tyneside Economic Review – Spring 2007 Tyne & Wear Research and Information Economic Review – Spring 2007 CONTENTS Key Points ......................................................................................................................................... 1 1.0 ECONOMIC OVERVIEW .......…………………………………………………………….….…… 3 1.1 Global Economy …………………………………………………………………………………………………. 3 1.2 Recent Economic Trends ……………………………………………………………………………………….. 3 1.3 Housing Market Latest ………….……………………………………………………………………………… 7 1.4 Labour Market Latest ……………………………………………………………………..................................... 7 1.5 Labour Market Trends …………………………………………………………………………………………… 9 1.6 Future Economic Prospects ……………………………………………………………………………………… 10 2.0 ECONOMIC INDICATORS …………………………………………………..………………..…. 11 2.1 Business Conditions Indicators for Tyne & Wear (graphs) ……………...………………………………………. 11 2.2 National Economic Indicators (table) ……………………………………………………………………………. 12 2.3 Labour Market Indicators (table) ………………………………………………………………………………… 13 3.0 LOCAL JOBS AND ORDERS ..…………………………………………………….…………….. 14 3.1 Job Gains ……………………………………………………………………………………………………….... 14 3.2 Job Losses ………………………………………………………………………………...................................... 16 3.3 New Contracts & Orders for Local Firms ……………………………………..………....................................... 18 4.0 INVESTMENTS & DEVELOPMENTS ………………………………………............................ 19 4.1 Investment & Development Trends ………………………………………………………..................................... 19 4.2 Investment & Development News ………………………………………………………....................................... 20 4.3 Aid & Finance ……………………………………………………………………………..................................... 24 4.4 Regional Development Grants …………………………………………………………....................................... 24 5.0 INDUSTRIES AND FIRMS ..………………………………………………………………………. 25 5.1 Business Overview ………………………………………………………………………………………………. 25 5.2 Nanotechnology …………………………………………………………………………………………………. 25 5.3 Biotechnology & Chemicals …………………………………………………………………………………….. 26 5.4 Offshore, Shipbuilding & Ship Repair ………………………….……………………………….……………… 26 5.5 Motor ……………………………………………………………………………………..................................... 27 5.6 Electronics …………………………………………………………………………………………….…………. 27 5.7 Food & Drink ………………………………………………………………………………………….…………. 27 5.8 Printing & Packaging ……………………………………………………………………………………………. 27 5.9 Construction (Including Housing) .……………………………………………………………………………… 27 5.10 Retailing …………………………………………………………………………………………………………. 28 5.11 Culture, Tourism & Hotels ……………………………………………………………………………….….…… 29 5.12 Transport & Communications …………………………………………………………….……………….…….. 29 5.13 Financial Services ………………………………………………………………………………………………... 30 5.14 Business Services ………………………………………………………………………………………………... 30 5.15 Software & Digital Industries ……………………………………………………………………………………. 31 5.16 Public Services …………………………………………………………………………………………………… 31 6.0 PUBLICATIONS AND RESEARCH ….………………………………………………………….. 32 FIGURES Fig 1.1 Output Gross Domestic Product at Market Prices ……………………………………………………………….. 3 Fig 1.2 UK Retail Prices 1992-2005 CPI, RPI and RPIX ……………………………………………………………….. 4 Fig 1.3 UK and NE Exports ……………………………………………………………………………………………….. 6 Fig 1.4 Public Sector Accounts 2000-Q1 2007…………………………………………………………………………….. 6 Fig 1.5 Employment (Employees in employment, seasonally adjusted) …………………………………………………... 7 Fig 1.6 Claimant Count Rates (Not seasonally adjusted) ………………………………………………………………... 8 TABLES Table 1.1 Exports, UK and NE, 2001-2005. Goods Only …………………………………………………………………... 5 Table 4.1 Selective Finance Investment in England: Offers of £75,000 or more (1 July – 30 Sept 2006) …………………. 24 Note: J=The Journal, FT=Financial Times, BLS=Bureau for Labour Statistics (US), BSNE=Business Survey North East, DBS=Durham Business School, EC=Evening Chronicle, EcN=The Economist Newspaper, EN=European Newsletter, ESF= European Social Fund Website, ESt=Eurostat, ET=Economic Trends, FED= New York Federal Reserve, HBOS=Halifax Bank of Scotland, HMCE= HM Customs & Excise, HMLR= HM Land Registry, LMT= Labour Market Trends; NBC=National Broadcasting Company (US), NECC=North East Chamber of Commerce NSO=National Statistics Online, NUA=Newcastle University Arches Alumni Association Magazine, ONS=Office for National Statistics, OEF= Oxford Economic Forecasting, R&R=Regeneration & Renewal, TO= Times Online; WHES=White House Economic Statistics (US), UKBP= www.ukbusinesspark.co.uk Tyne & Wear Research and Information Economic Review – Spring 2007 Tyne & Wear Research and Information Economic Review – Spring 2007 KEY POINTS: • The UK economy continued to grow strongly in Q1 2007; UK GDP grew by a relatively rapid 0.7%, maintaining similar growth to the previous four quarters. (§1.2) UK economic growth is forecast to slow, to 2.6% in 2007 and to 2.3% in 2008. (§1.6) • Inflation, however, remains well above the 2% target with CPI annual inflation at 2.8% in April, (down from 3.1% in March). The more widely-used RPI was 4.5%. (§1.2) The base rate was raised ¼% in May, to 5.5%. (§1.2) • Business investment for Q1 2007 was up 9.6% from a year earlier, but 1.3% lower than the previous quarter. (§1.2) • House prices in Tyne & Wear in Q4 2006 were up 6.7% on a year earlier (this is 1.5 percentage points slower than in England & Wales, up 8.2%). [Land Registry provisional data] (§1.2) • In Q1 of 2007, the Tyne & Wear balance of job gains over job losses (logged by TWRI from the press) was, at just +773, the same as in the previous quarter (+770) (§3) • Business Indicators for Tyne & Wear in Q1 2007 weakened for both sales and orders. (§1.2) Key Points from News Digest (January – end March 2007) Reported job gains (+ 1,527) exceeded losses (- 754) in Tyne & Wear by + 773. (All gains and loses from press reports) (§ 3.1, 3.2) 400 jobs were created in North Tyneside with the development of GE Money’s new £5m call centre. Premier Waste Management will create 200 jobs in Sunderland by 2012 with the opening of a new recycling plant. Winn Solicitors will create 180 jobs in Newcastle by 2010 as the law firm plans to quadruple its turnover by this date. (§ 3.1) 240 jobs will be lost in Sunderland when ARC closes its glass-making factory in September. 140 jobs were lost from the laundry company Country Luxdon, also in Sunderland. (§ 3.2) In Newcastle, Siemens (formerly Parsons) have won a £100m contract to replace turbines at the Drax Power Station in North Yorkshire. (§3.3) At Newcastle’s Centre for Life, a £4m suite of new laboratory facilities has been opened. (§ 5.2) In Sunderland, plans to redevelop the former Vaux Brewery site by Sunderland ARC were approved by the Secretary of State. Tesco later submitted a legal challenge to the decision. (§ 5.2) Cenamps, at the Centre for Life in Newcastle, is to create a new £2m nanotechnology unit capable of building film at an atomic level. (§ 6.2) Nissan is to export its new SUV model the Qashqai to Japan, its first since 1996. The Sunderland plant has made 20,000 units since December. (§ 6.5) Atmel has received around 15 expressions of interest for its North Tyneside microchip factory. Staff were given a raise in salary to keep the workforce intact. (§ 6.6) Field Packaging in North Tyneside was saved from closure after staff accepted salary changes. (§ 6.8) Tyne & Wear Research and Information 1 Economic Review – Spring 2007 The private rented sector has grown in order to meet demands for student housing. Grant Fund Management, Clark Residential and Unite all plan to increase their stock of student housing. (§ 6.9) A City Development Company (CDC) is to be established by Newcastle and Gateshead Councils following the success of the Newcastle Gateshead Initiative. It is the first to be established across a local government boundary. (§ 6.10) Gateshead’s Metrocentre is now part-owned by the Singapore Government, who bought a 40% share in the Shopping Centre for £426m. (§ 6.11) Benfield Group has been award the Tyneside franchise for Kia cars, its first new franchise in three years. (§ 6.11) Danish Airline Cimber Air launched a daily flight from Copenhagen to Newcastle Airport in March. This is Newcastle’s 40th scheduled daily destination. (§ 6.13) The Department for Transport began short-listing applicants for the East Coast Main Line. Four bidders were confirmed, including a partnership involving GNER. (§ 6.13) TWRI highlighted notable improvements in a number of key economic indicators in the 2006 Annual Monitoring Report (AMR), prepared by TWRI for the Tyne Wear Partnership (§7), including; • Employment • Earnings • The proportion of People of Working Age (PWA1) with NVQ qualifications • The proportion of pupils achieving 5+ A*-C grades at GCSE However, there was deterioration in some indicators; • Employment rates for 16-19 year-olds fell in 2005-06 • The unemployment rate rose in 2004-05 (from 5.6% to 6.7%) and remained at a similar level in 2005-06 (6.6%) 6th June 2007 1 PWA is the Population of Working Age (16-59/64 in the UK) 2 Tyne & Wear Research and Information Economic Review – Spring 2007 1.0 ECONOMIC OVERVIEW 1.1 Global